How Airbnb Affects Hotel and Hospitality Industry in US

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How Airbnb Affects Hotel and Hospitality Industry in U.S
Name
Course
Date of Submission
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Table of Contents
1.0 Introduction ............................................................................................................................... 3
2.0 Literature review ....................................................................................................................... 3
3.0 Research question ..................................................................................................................... 5
4.0 Research design and methodology............................................................................................ 5
4.1 Introduction ........................................................................................................................... 5
4.2 Research design ..................................................................................................................... 6
5.0 Data collection and analysis...................................................................................................... 7
6.0 Time scale ................................................................................................................................. 7
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1.0 Introduction
Sharing economy platforms have become very popular in the last couple of years and
have transformed the way people source accommodation facilities, travel, and borrow among
many other activities. Particularly, the influence of Airbnb has grown tremendously in the past
decade capturing the attention of the leaders of the world’s largest hotel companies in the United
States. Airbnb, a pioneer of the “sharing economy” concept, provides travel accommodation and
boasts of serving over thirty million guests since it was founded in 2008 (Teubner, 2014). This
platform connects individuals who are looking for accommodation and those who have space to
share (Farronato and Fradkin, 2015. The service charges a commission on both its hosts and
guests. Since its inception, Airbnb has enjoyed a rapid growth. In fact, the website is now being
used by over fifty-thousand guests per night and operates in more than 30,000 cities and 180
countries. Airbnb has risen quickly and now poses a threat to the hotel industry since travelers
prefer booking with independent hosts via the site rather than the traditional hotel reservation
system.
2.0 Literature review
A rapidly growing body of literature on the impacts of Airbnb on the hotel industry
indicates that the former is indeed competing with and acquiring a large market share from the
latter according to information by industry experts. The Hotel Association of New York
City(HANYC) research of 2014 on the impact of Airbnb on New York’s hotel industry was the
first ever research conducted and disclosed to the public. The study conducted over a period of
twelve months starting September 2014 provided confirmatory evidence of the negative impact
of Airbnb to the tune of $2 billion not only on New York’s hotel industry but also the broader
economy (Lehr, 2015). The threat posed is both direct and indirect. The direct impact of Airbnb
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amounted to $450 million whereas the indirect impact was estimated at $1.7 billion over the
twelve-month period.
To theoretically analyze my research question, it is imperative to decode the factors that
attract customers to Airbnb, their perceptions about these services and the aspects that give
Airbnb a competitive edge over the hotel industry. A new survey from Goldman Sachs found out
that travelers seemed to stick with the Airbnb service after trying it for the first time. The survey
polled 2000 participants who were active users of this service. The research established that 80%
of participants who had not used Airbnb preferred traditional hotel services (Guttentag, 2015).
However, for those who had used it, only 41 % preferred the hotel industry over Airbnb. For
most travelers, Airbnb has a pricing advantage over the traditional hotels. It is easier to find
cheap and equally good Airbnb listings in the heart of cities, thus helping travelers on a budget
save a lot of money (Kim and Zo, 2015). Some participants reiterate that an Airbnb room comes
with a personality which reflects the culture and individual style of the host. Most assert that
there is a comforting authenticity knowing that you stay in a real home instead of a room
mimicking a real home (Zervas et al., 2015). Therefore, Price, authenticity, and personality are
some of the factors that render Airbnb a preferred choice of many customers over the traditional
hotel experience (Labrecque et al., 2013).
Airbnb has not materially destroyed the hotel industry yet. However, at the pace at which
it is encroaching into the hotel industry’s market share, there are concerns that it could soon
damage hoteliers (Oskam and Boswijk, 2016). Despite being introduced less than a decade ago,
Airbnb has surpassed many hotel firms globally. The recent surge of this business begs two
questions. Can the rise of Airbnb disrupt the hotel industry or does it cater to a different market
niche? Latest research seemingly indicates that Airbnb occupies the same market niche as hotel
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industries. To make matters worse for hoteliers, Airbnb has higher cost advantages than their
competitors can never have. The Airbnb business is fairly self-regulated, allowing the hosts to
abide by simple and generic rules such as supplying first aid kits, emergency contact numbers
and smoke alarms. The business has significantly lowered the barriers to entry into the industry
thus bringing millions of rooms into the hotel market. The largest markets for Airbnb services,
New York, Miami and San Francisco have already suggested that this business can out do the
hotel industry.
3.0 Research question
The research question will look into the competitive edge of Airbnb over traditional
hotels in United States. Therefore, the research question will be; What is the impact of Airbnb on
independent budget hotels(IBH) in United States? I will try to investigate if Airbnb proliferation
is negatively affecting IBH in the US and whether the demand of Airbnb will diminish or
continue its upward surge in the upcoming years. More importantly, it would be erroneous to
overlook the customer perceptions of these two services, Airbnb, and hotels. I will, therefore,
evaluate the rationale pertaining the decision-making process of Airbnb users. It would also be
prudent to explore hotel and house regulations hindering or benefiting independent budget
hotels, Airbnb or both.
4.0 Research design and methodology
4.1 Introduction
The study examines the factors constituting the market needs correspondence through a
survey. Westat will conduct the survey with the purpose of researching;
1. The impact of Airbnb on Independent budget hotels.
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2. The needs of consumers when booking accommodation
3. How the two services (Airbnb and Traditional hotel services) address consumer needs.
4. Government regulations promoting or inhibiting the expansion of Airbnb service, the hotel
industry or both.
Particular attention will be paid on varying consumer needs based on the motivation of their
travel, whether pleasure or business.
4.2 Research design
The grounded theory will be used to explain the impact of the construct of trust on the
internet. Ert and Magen (2015) assert that the Matching of the host and the and the client calls
for mutual trust. Therefore, the research will elaborate some of the initiatives of Airbnb in
building high levels of trust between the host and guest such as consumer reviews and a
verification of the identity of both the host and the guest. By conducting a statistical analysis of
feedback from 2000 respondents, the research will analyze the influence of this information on
consumer choices thus determining the significance and informing on whether to validate or
reject my null hypotheses. Qualitative research provided by the participants will further support
my findings and inform on the directions for future research in this field.
The following hypotheses will stand out in my research.
Hypothesis 1
H0: The Airbnb industry is significantly encroaching into the hotel industry’s market share.
H1: The Airbnb industry poses no significant threat to the hotel industry presently and in the near
future.
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Hypothesis 2
H0: Pricing, personality and authenticity drive consumers’ choice of Airbnb services over the
traditional hotel experience.
H1: Pricing, personality, and authenticity do not significantly motivate consumer preferences of
the Airbnb and hotel industries.
5.0 Data collection and analysis
A survey stands out as the most useful tool for data collection in this research since it is
cost effective, can be administered efficiently remotely through email, mobile devices, and
online platform, it is capable of collecting information from a large number of respondents. More
importantly, a survey can collect a broad range of data including opinions, attitudes, values and
beliefs which are, by and large, the information I will be seeking in this research (Flick et al.,
2004). The survey will constitute a representative sample size of 2000 respondents sourced
across all the fifty states of United States. The inclusion criteria require the participants to be
residing in the United States and be over the age of 18. More so, they should have actively
engaged with the Airbnb service in the past six months with at least one reservation booked
through this service. The data collection process will aim at capturing the demographical
information of respondents, their age group, income bracket, motivations for traveling and their
perceptions about the two accommodation services. The qualitative research will establish the
participants brand loyalty for Airbnb by asking the respondent to ascertain whether Airbnb is a
substitute for hotel service. A p-test will be used to ascertain the significance of the hypotheses.
A significance value of 7% will inform on whether to accept or reject the null hypotheses.
6.0 Time scale
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Task Name
Duration
Start
Finish
Literature
12 weeks
Tue 15/11/2016
Mon 13/11/2017
Proposal submission
1 day
Tue 14/11/2017
Tue 14/2/2017
Obtaining resources
0.6 weeks
Wed 15/2/2017
Sat 18/2/2017
Data collection
1 week
Mon 20/2/2017
Mon 27/2/2017
Statistical tests
2 weeks
Tue 28/2/2017
Tue 11/3/2017
Data analysis
8 weeks
Thu 13/3/2017
Tue 13/6/2017
Write up
10 weeks
Wed 14/6/2017
Mon 28/8/2017
Submission of drafts
1 day
Tue 29/8/2017
Tue 29/8/2017
Editing
5 weeks
Wed 30/8/2017
Sat 7/10/2017
Final submission
1 day
Mon 9/10/2017
Mon 9/10/2017
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Bibliography
Ert, E., Fleischer, A. and Magen, N., 2015. Trust and Reputation in the Sharing Economy: The
Role of Personal Photos on Airbnb. Available at SSRN 2624181.
Farronato, C. and Fradkin, A., 2015. Market Structure with the Entry of Peer-to-Peer Platforms:
The Case of Hotels and Airbnb. Q Stanford University, in progress.
Flick, U., von Kardoff, E. and Steinke, I. eds., 2004. A companion to qualitative research. Sage.
Guttentag, D., 2015. Airbnb: disruptive innovation and the rise of an informal tourism
accommodation sector. Current issues in Tourism, 18(12), pp.1192-1217.
Kim, J., Yoon, Y. and Zo, H., 2015. Why people participate in the sharing economy: A social
exchange perspective. PACIS 2015 proceedings (Paper 76).
Labrecque, L.I., vor dem Esche, J., Mathwick, C., Novak, T.P. and Hofacker, C.F., 2013.
Consumer power: Evolution in the digital age. Journal of Interactive Marketing, 27(4),
pp.257-269.
Lehr, D.D., 2015. An analysis of the changing competitive landscape in the hotel industry
regarding airbnb.
Oskam, J. and Boswijk, A., 2016. Airbnb: the future of networked hospitality
businesses. Journal of Tourism Futures, 2(1), pp.22-42.
Teubner, T., 2014. Thoughts on the sharing economy. In Proceedings of the International
Conference on e-Commerce (Vol. 11, pp. 322-326).
Zervas, G., Proserpio, D. and Byers, J., 2015. A first look at online reputation on Airbnb, where
every stay is above average. Where Every Stay is Above Average (January 28, 2015).

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